The Fantastic Wisconsylvania Zero-Bureaucratic-Cost School of Bankruptcy Theory: A Comment

In two recently published articles, Wisconsin Law Professor Lynn LoPucki and Pennsylvania Law Professor Elizabeth Warren, nearly simultaneously, fired the latest shots in one of academia’s hottest ongoing debates: whether any good reason for having bankruptcy law exists. Justice Holmes once opined that the future belonged to the lawyer skilled in statistics and economics. LoPucki and Warren apparently agree about statistics but argue that, in a world with positive transaction costs, economic theory has little to contribute to our understanding about the justifications for bankruptcy law.

I write to highlight what one might easily overlook in LoPucki’s and Warren’s pieces. As they assail the usefulness of economic analysis, particularly analysis that begins by assuming zero transaction costs, they simultaneously inaugurate a new analytic tradition: the Fantastic Wisconsylvania School of Zero-Bureaucratic-Costs. They use their new theory to argue that markets are costly and thus are of limited or no use to people who want to take businesses apart or to reconfigure them. Corporate reorganizations, they urge, require the costless and perfectly functioning political appointee, the bankruptcy judge. The birth of this jurisprudential school is too significant to be permitted to pass unheralded.